In today's Freedom Friday blog and email newsletter, I'm going to talk about an issue that I get asked about a lot, or sometimes when it is too late, and although I do not get asked this question directly, many of my prospective new client inquiries are either seeking to prevent this type of a problem, or the problem already exists, and my client needs to take legal action to protect his or her interest. In today's Freedom Friday blog and email newsletter I'm talking about, “How to fight for control of your business.”
If you're in business by yourself as a sole proprietorship or a single-member LLC, this is not something you need to worry about. However, if you're in a multi-member LLC, a multi-shareholder corporation, or a “partnership” of any kind, this is a huge issue. When people come together to start a business, they pull together, sacrifice, and hope to succeed together. Sometimes they do and are very successful. Sometimes they are not. Even if the business is successful on the books, it may not be as successful internally. Sometimes the ego, greed, jealousy, or other reasons lead one of the “partner” or members of the LLC astray to put his or her interests ahead of the business. This matters a lot to the conduct of the business and the success of the company. This is because opportunities may be lost due to the conduct of the equity member (i.e., the shareholder, partner, or member) that went astray.
Some of the signs that a controlling shareholder, partner, or member may be up to no good include the following:
- Restricting a member's access to financial data.
- Making excuses to deny access to the books and records of the business.
- Contracts, pricing information, and other sensitive information are taken to the controlling member or group's other business.
- The controlling member or partner has his or her friends and family in sensitive and paid positions in the company, yet the friends and/or family have little or no experience in the business.
- The controlling member or partner hires CPAs and/or lawyers to engage in tactics inconsistent with the goals of the business.
- The smaller voting bloc (or smaller equity member or partner) is intentionally frozen out of the company's operations and decision-making.
If you think your business partner is engaged in activities which appear to be illegal, corrupt, fraudulent, or oppressive towards you, you must act quickly. Your business may be the single largest investment in your life as you might have invested significant funds, time, and effort in helping the business succeed (at least on paper). Now your former best friend or relative is in the opposite corner leveraging control and operation of the business. It's up to you to act quickly.
A breach of fiduciary duty lawsuit is technical, expensive, and emotionally draining, but failing to act is not just ceding the field; it may cost you your rights and interest in the business. More importantly, a judge may consider failing to act is an inexcusable delay, and he or she may be unsympathetic to your problem. If you believe your business partner is placing in you such a position, you need to contact a lawyer immediately.
Thinking about starting a small business? Or maybe your small business is having issues with contracts, leases, business partners, collection issues, or experiencing other barriers to growth? Please contact me at [email protected] to schedule a FREE strategy session.
For more information about Liberty Legal Solutions, LLC, please visit our website at http://www.libertylegalok.com/